Who holds the purse strings? The MoJ consults on identifying sources of funding in judicial review proceedings

23 July 2015


Part 4 of the Criminal Justice and Courts Act 2015 introduces new provisions about the financing of judicial review proceedings (among other reforms). The government has published a consultation seeking views on proposals for amendments to the Civil Procedure Rules to implement these reforms, setting out the financial information required at the outset of a judicial review claim and for applications costs capping orders.

In particular, the consultation seeks views on proposals for rules to set out -

  1. that a declaration of funding sources is required on an application for permission,
  2. that details of third party funding or likely funding in connection with an application for judicial review need not be provided where the funding is below a threshold of £1,500, and
  3. that a more detailed picture of the applicant's financial circumstances is required on application for a costs capping order than on application for permission.

Background

On 12 February 2015 the Criminal Justice and Courts Act 2015 (the CJCA) received Royal Assent and brought into law a series of reforms to judicial review, which we commented on in "Judicial Review Reforms - will they have an impact on you?".

One of the main areas of focus for those reforms is increased transparency around the funding of judicial review proceedings. Section 85 of the CJCA introduces new subsections into section 31 of the Senior Courts Act 1981 which state that the court is required to refuse permission to apply for judicial review unless the claimant has provided the court with specified information about the financing of the claim.

The specified information will be set out in 'rules of court' and may include -

  1. information about the source, nature and extent of financial resources available, or likely to be available, to the claimant to meet liabilities arising in connection with the claim, and
  2. if the claimant is a body corporate that is unable to demonstrate that it is likely to have financial resources available to meet such liabilities, information about its members and about their ability to provide financial support for the purposes of the claim.

The rules of court must specify a minimum threshold for an individual's financial support for a claim, below which a person will not need to be identified.

Under section 86 of the CJCA, the High Court and the Court of Appeal must have regard to the financial information which the claimant has provided when determining by whom and to what extent costs are to be paid in relation to judicial review proceedings. The court must also consider whether to order costs to be paid by a person, other than the claimant, who is identified as providing financial support for the purposes of the claim, or has been identified as likely or able to do so.

Section 88(5) of the CJCA provides that rules of court may specify similar financial information which must be provided as part of an application for a cost capping order. Section 89 requires the court to have regard to the financial resources of the parties to the proceedings, including the financial resources of any person who provides, or may provide, financial support to the parties, when considering whether to make a costs capping order and what the terms of that order should be.

Having sketched out the parameters for the financial information which a claimant must provide, both with the initial application for permission and with any application for a costs capping order, the CJCA leaves the detail of precisely what information will be required to be provided in rules of court - the Civil Procedure Rules (the CPR) for judicial review cases conducted in the High Court and Court of Appeal.

The Ministry of Justice has now (on 21 July) published a consultation on what it considers that detail should be, following which it will invite the Civil Procedure Rules Committee to amend the CPR. The consultation will run until 15 September 2015 and the government intends to publish its response to submissions during the next parliamentary session.

The proposals

Financial information to be provided on application

The consultation states that the purpose behind section 85 of the CJCA is to give judges more information on the actual or likely funding of each application for judicial review to allow the court to make fully informed decisions in respect of how the costs of claims should be allocated. Such financial information may be used in conjunction with other information the court might seek, such as the degree of control an identified third party funder exercises over the direction of the claim.

It is proposed that the new rules will require a claimant to make a declaration at the outset of the claim, covered by a statement of truth, as to which of the following applies -

  1. the claimant is not a corporate body and intends to meet all likely liabilities arising from the claim from its own financial resources - in which case no further information will be required,
  2. legal aid has been applied for and the application is pending or has been granted - in which case no further information will be required (claimants are already required to state on the claim form if a legal aid certificate has been issued to fund proceedings),
  3. the claimant is a corporate body that has, or is likely to have, sufficient funds to cover liabilities arising in connection with the application for judicial review - in which case, no further information will be required,
  4. funding for the claim will come from a source other than from the claimant's resources or legal aid - in which case, where the total contribution and/or likely contribution is in excess of a specified threshold, the name and address of the contributor, and the size of the contribution, will be provided, or
  5. the claimant is a corporate body that is unable to demonstrate that it is has, or is likely to have, sufficient funds to cover liabilities arising in connection with the application for judicial review - in which case, the names and addresses of the claimant's members will be provided, together with their interest in the claimant.

The claimant will be under a duty to update the information provided to the court if its financial circumstances change during the course of a case. In line with existing practice, the financial information provided to the court will not be made public and will not be provided to the defendant.

Where required, it will be for the claimant to estimate the likely total cost of the litigation. The government is not currently proposing that claimants be required to provide that figure or their justification for it as this could impose too significant a burden and delay proceedings. The court would, however, retain a power to request information on estimated costs if required.

The minimum threshold for identifying individual contributors

The government proposes to introduce a single threshold of £1500, below which individual financial contributors to a claimant will not need to be named in the information provided at the outset of the claim. In the government's view, this threshold will capture contributions which may be indicative of a degree of third party control of the claim, an issue relevant to whether a third party cost order would be appropriate, without capturing small contributions made without any real expectation of creating a relationship of control.

In a statement to Parliament on 13 January 2015, the then Secretary of State indicated that the government was minded to consult on a second threshold which would be expressed as a percentage of the funds available to support a claim.

In the event, the government has decided not to consult on such a percentage threshold on the basis that it would be overly complex in practice. However, the consultation does seek views on whether it would be possible and desirable to include a percentage threshold and, if so, what the percentage would be of (the estimated costs of the claim or the funds available to meet the costs of the litigation, for example).

Financial information to be provided with an application for a costs capping order

Sections 88 to 90 of the CJCA put the protective costs orders, or PCOs, which have been developed by the court on a statutory footing.

Like PCOs, cost capping orders will limit or extinguish applicants' liability to pay other parties' costs, irrespective of the outcome of the case. Similarly, they will be made in cases which involve issues of general public importance which the public interest requires to be resolved and where, without an order, the applicant would discontinue or withdraw from the judicial review, and would be acting reasonably if it did so. At present the court considers the financial resources of the parties when determining whether to make a PCO and, if such an order is appropriate, what its terms should be.

Section 88 requires an applicant for a cost capping order to provide financial information as part of the application. Such information will be in addition to that provided under section 85 and, unlike the latter, will be made available to the defendant and, unless the court orders otherwise, to interested parties.

It will also be more detailed than the financial information to be filed with the application for permission. An applicant for a cost capping order will be required to give information about its financial position, including identifying likely financial support from third parties. The government proposes that in most situations the information required would include a breakdown of the applicant's significant assets, such as real property, liabilities, its income and significant regular expenditure.

Commentary

The government's proposed package of reforms to judicial review contained many controversial elements which generated a considerable amount of heated debate - including the abandoned threat to amend the rules on standing. Against this background the proposal to require the provision of information regarding the funding of claims at the outset of the claim and on application for a costs capping order received little attention.

In relation to costs capping orders the new proposals may make little difference, save to codify the requirements already applied by the courts. However, the proposals around provision of information regarding sources of funding at the outset of all claims have the potential to have more of an impact.

There has been an increasing tendency for claimants to form incorporated companies to act as a vehicle for litigation, in some cases with the express purpose of seeking to avoid the impact of adverse costs orders.

To the extent that such a shell company does not itself have sufficient resources to meet the potential costs of a claim the proposals, if adopted, will require the identification of its members, putting them in the firing line for a potential third party costs order. Under the CJCA, the court must consider making such an order and the fact that their names will be in front of a judge during that consideration may give some potential members of claimant companies, as well as those who contribute more than £1500 to a claim, pause for thought.

However, it should be noted that the duty imposed on the court by the CJCA is merely to have regard to the financial information provided, thus preserving the court's discretion when awarding costs. It will be interesting to see how the courts use such information if the government gives effect to its proposed rules.


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